Closed Door Deals Are Not the Oregon Way

Oregon State Legislature sent this bulletin at 02/02/2016 04:25 PM PST

The
Oregon Public Utility Commission (PUC) was created by the Legislative Assembly
to ensure that “safe and reliable utility services are provided to customers at
just and reasonable rates, while fostering the use of competitive markets to
achieve these objectives.” That body is charged with regulating only the investor-owned
utilities (IOUs) that are owned by private companies such as PacifiCorp and
Portland General Electric (PGE).

IOUs
are given monopolies within their utility service areas. These monopolies are
approved and regulated by the state. The PUC is charged with ensuring that the
more than 1.5 million PacifiCorp and PGE customers in Oregon are treated fairly
by those two companies.

The
PUC held an informational
hearing in Salem last Friday regarding House
Bill 4036. The new law proposed by PacifiCorp and PGE is being
called the “Clean Electricity and Coal Transition” bill.

HB
4036 would functionally double the amount of renewable power required to meet
the Oregon
Renewable Portfolio Standard (RPS). It would also eliminate
both the coal-fired generation of electricity in Oregon and the importation of
electricity generated by coal-fired plants located outside of the state.

The
proposed law was negotiated by a selected
group of participants. Thelist includes environmental advocacy organizations, renewable
energy producers, organizations that advocate for renewable energy, PacifiCorp
and PGE. Their bargain was reached behind closed doors in confidential
settings.

Incredibly,
the PUC and its members were not allowed to participate in the closed door
meetings. All but one organization that advocates for ratepayers also appear to
have been barred from the discussions.

The
only exception was the Citizens'
Utility Board (CUB). CUB was formed in 1984 by
initiative petition to advocate for residential ratepayers. In my experience,
CUB has consistently and unabashedly advocated for the production of renewable
power.

The
current chair of the CUB
Board of Governors is the Director of Meteorology at
Iberdrola Renewables, which is the new name for PPM Energy, Inc. That
company was previously the energy acquisition unit for PacifiCorp. It is now
owned by the Spanish-based utility Iberdrola.

She
has also delayed consideration of the reappointment of two of the commissioners
until after the Legislative Assembly has completed consideration of HB 4036.

Unfortunately,
the development of new laws in closed negotiations among special interest
groups appears to be the “New Oregon Way.”

The
IOUs claim the proposed changes are affordable, workable and are better for
their customers than the provisions of Initiative Petition 63.

That
proposed ballot measure is currently being advanced by many of the same
advocacy organizations who participated in the closed door negotiations.

Not
surprisingly, those who were not at the table were on the menu. The list of
significant losers appear to include the IOUs’ ratepayers, the consumer owned
utilities that compete with the IOUs, and the PUC itself.

Several
points were made abundantly clear during Friday’s PUC hearing.

The
claim by IOUs that the PUC’s informational hearing was “unprecedented” was
first laid to rest by the Commission Chair. She emphatically cited other
examples of similar hearings. The Chair also made clear that she and her fellow
commissioners are not pleased that the IOUs failed to consult with them regarding
the negotiations. Nor are they pleased with the product of the discussions,
which is HB 4036.

The
PUC members pointed out that HB 4036 would reverse no less than four of that
body’s previous decisions.

One
example is in regard to the energy production tax credit (PTC). The most common
federal PTC is two cents per kilowatt hour, and expires after ten years. HB
4036 appears to authorize the IOUs to shift the cost of the expired tax credit
to their ratepayers without even consulting the PUC.

Another
reflects the PUC’s concern regarding the reliability of the power grid when much
higher percentages of intermittent wind and solar resources are required. The Commissioners assert that HB 4036
eliminates the PUC’s ability to maintain control of reliability issues.

The
PUC members openly questioned the appropriateness of the IOUs’ participation in
the confidential negotiations. The IOUs,
whom the PUC is charged with regulating, appear to have rewritten their own
preferred outcomes to PUC orders. They further charged that HB 4036 raises other
issues that were previously decided by the PUC through its extensive public
processes.

Members
of the PUC pointed out that HB 4036 will result in little, if any, overall
reduction in greenhouse gas (GHG) emissions. The IOU representatives were not
able to refute that assertion.

The
only coal-fired plant in Oregon, located in Boardman, is already scheduled to
be closed. Coal-fired plants located in other states that are currently supplying
electricity to Oregon will continue to operate into the foreseeable future.
Those plants will not cease to operate, will not stop using coal and will not
reduce their GHG emissions.

Although
the scheme will serve to help meet Oregon’s GHG reduction goals, neither
regional nor global GHG emissions will be measurably reduced. It is worth
noting that Oregon currently produces about 0.04 percent of global GHG
emissions. That is four ten-thousandths of the total global GHG emission, or one
part in 2,500! The simple, undeniable fact is that even the complete
depopulation of Oregon would not result in a measurable change in global GHG
emission.

"Prudently incurred
costs" can generally be recovered from an IOU’s
ratepayers. Those companies are generally allowed to make about a ten percent
profit on virtually all of their prudently incurred costs. The PUC members questioned
the IOU representatives regarding the many ways they wrote HB 4036 to redefine
most of the cost of the new law’s implementation to be costs that are
“prudently incurred.”

PUC
members further declared during the hearing that HB 4036 does create significant
incentives to build solar and wind powered generation capacity. However, they then
asserted that the text of the bill throws out the requirement for the new
construction to be effective and prudent. It appears to remove oversight by both
the public and the PUC. The result is authorization for the IOUs to charge the
costs of new renewable generation facilities to their ratepayers, as well as
taking their designated profits on those charges.

Most
of the cost of siting and constructing of wind and solar generation facilities
is currently being paid by taxpayers. These facilities are currently being
subsidized with refundable tax credits, production tax credits, accelerated
depreciation and loan guarantees.

Many
facilities receive well more than 80 percent of their funding through these tax
giveaways. The fact of the matter is that most of the cost of complying with
Oregon’s RPS is currently being paid by the taxpayers, rather than the IOUs’
customers.

PUC
members pointed out how HB 4036 could allow the IOUs to transfer much of these
costs to their customers with reduced or delayed regulatory oversight.

The
Commissioners questioned the purpose of two specific sections of HB 4036 that appear
to further enhance the IOU service area monopoly. Those sections appear to make
any encroachment on their monopoly protected territory and customers
prohibitively expensive.

The
bill would force consumer owned utilities, like public utility districts and
municipal utility districts, to pay enormous new costs in the event that they
took a single ratepayer from the IOU monopoly protected service area. HB 4036
would essentially prohibit IOU ratepayers from escaping their monopoly rates,
other than by moving out of their protected service area.

PacifiCorp
has already
increased its rates by more than 80 percent since 2005. I
believe HB 4036 has the potential to cost their ratepayers billions of
additional dollars over the next two decades. Obviously, nearly ten percent of
their new prudently incurred costs may be retained as profit for their
investors.

PUC
members asked repeated questions regarding the potential cost increase for IOU
customers. The queries were generally deflected as being either a work in
progress or as currently being modelled.

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